scholarly journals An Empirical Analysis of Convertible Bond Issues : Focused on Characteristics of Convertible Bonds and Issuing Firms

2012 ◽  
Vol null (41) ◽  
pp. 525-548
Author(s):  
곽영민
Keyword(s):  
Empirical Analysis ◽  
Convertible Bonds ◽  
Convertible Bond ◽  
Bond Issues

scholarly journals Factors Affecting The Equity Price Impacts Of Convertible Bonds

2011 ◽  
Vol 8 (4) ◽  
pp. 79 ◽  
Author(s):  
Bruce R. Kohlman ◽  
Robert C. Radcliffe
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Convertible Bonds ◽  
Equity Returns ◽  
Convertible Bond ◽  
Factors Affecting ◽  
Price Impacts ◽  
Bond Issues ◽  
Abnormal Stock Returns ◽  
Equity Price

This study examines abnormal stock returns associated with both the date a convertible bond issue is announced and the date it is sold. Results suggest the negative stock price effects observed I this and previous studies are due to the equity component inherent in convertible bonds, and an easily observed measure of that equity component is offered. In addition, results suggest that convertible bond issues sold by firms with previously issued outstanding convertibles are met with larger negative abnormal equity returns.

scholarly journals Wealth effects of convertible bond issues – further evidence of agency costs and managerial entrenchment

2010 ◽  
Vol 7 (4) ◽  
pp. 34-49
Author(s):  
Christopher Fink ◽  
Dirk Schiereck ◽  
Joachim Vogt
Keyword(s):  
Empirical Evidence ◽  
Agency Costs ◽  
Convertible Bonds ◽  
Wealth Effects ◽  
Convertible Bond ◽  
Convertible Debt ◽  
Managerial Entrenchment ◽  
Theoretical Approaches ◽  
Bond Issues ◽  
A Company

There is still some ambiguity about the company’s motivation for using the hybrid finance instrument of convertible bonds. Although manifold theoretical approaches provide varying assumptions about the rationale behind the issuance of convertible bonds, the empirical evidence about the major issuance reasons and the subsequent wealth impacts for the issuer remains mixed. The purpose of our study is to evaluate the relevance of these various theoretical approaches to explain empirically the motivation and characteristics of a company when issuing convertible debt and the resulting wealth effects for the company’s shareholders

Pricing Convertible Bond in Uncertain Financial Market

2021 ◽  
pp. 2150007
Author(s):  
Zhiqiang Zhang ◽  
Zhenfang Wang ◽  
Xiaowei Chen
Keyword(s):  
Differential Equation ◽  
Financial Market ◽  
Stock Price ◽  
Uncertainty Theory ◽  
Convertible Bonds ◽  
Convertible Bond ◽  
Uncertain Differential Equation ◽  
Numerical Examples ◽  
Liu Process ◽  
Uncertain Calculus

This paper is devoted to evaluating the convertible bonds within the framework of uncertainty theory. Under the assumption that the underlying stock price follows an uncertain differential equation driven by Liu process, the price formulas of convertible bonds and the callable convertible bonds are derived by using the method of uncertain calculus. Finally, two numerical examples are discussed.

ON THE VALUATION OF DERIVATIVES WITH SNAPSHOT RESET FEATURES

2008 ◽  
Vol 11 (08) ◽  
pp. 905-941 ◽  
Author(s):  
ERIC C. K. YU ◽  
WILLIAM T. SHAW
Keyword(s):  
Convertible Bonds ◽  
Convertible Bond ◽  
Put Options ◽  
Risk Characteristics ◽  
Black Scholes ◽  
Barrier Type ◽  
Simple Change ◽  
Discontinuous Nature ◽  
Change Of Variable ◽  
Digital Options

We propose a general approach that requires only a simple change of variable that keeps the valuation of call and put options (convertible bonds) with strike (conversion) price resets two-dimensional in the classical Black–Scholes setting. A link between reset derivatives, compound options and "discrete barrier" type options, when there is one reset is then discussed, from which we analyze the risk characteristics of reset derivatives, which can be significantly different from their vanilla counterparts. We also generalize the prototype reset structure and show that the delta and gamma of a convertible bond with reset can both be negative. Finally, we show that the "waviness" property found in the delta and gamma of some reset derivatives is due to the discontinuous nature of the reset structure, which is closely linked to digital options.

scholarly journals The Analysis of Chinese Convertible Bond Market

2020 ◽  
Vol 6 (2) ◽  
pp. p104
Author(s):  
Yuxin Tian ◽  
Jun Chen
Keyword(s):  
Portfolio Management ◽  
Convertible Bonds ◽  
Bond Market ◽  
Comprehensive Analysis ◽  
Convertible Bond ◽  
Historical Evolution ◽  
Chinese Market ◽  
Valuation Model ◽  
Black Scholes Model ◽  
Black Scholes

Convertible bond is a type of hybrid security with both bond- and stock-like features. The Chinese market of convertible bonds has developed dramatically during the last decade. This paper will conduct a comprehensive analysis of this market. Firstly, a brief introduction of convertible bond and the historical evolution of this market in China is presented, then we analyze various investment risks related to convertible bonds. Next, this paper proposes the basic valuation model for convertible bonds, which is the Black-Scholes model and modifies it by taking the delusion effect of conversion into account, leading to the Gailai-Schneller model. In addition, the differences of the outcomes obtained by these two models are compared and analyzed based on the pricing of Shanghai Electric convertible bond. In the sixth part, this paper mainly explains two types of applications of convertible bonds in portfolio management. In the end, several problems existing in Chinese convertible market as well as some suggestions for solving them are discussed.

Pricing resettable convertible bonds using an integral equation approach

2019 ◽  
Vol 31 (4) ◽  
pp. 417-443
Author(s):  
Sha Lin ◽  
Song-Ping Zhu
Keyword(s):  
Integral Equation ◽  
Convertible Bonds ◽  
Convertible Bond ◽  
Equation Approach ◽  
Fair Price ◽  
Bond Price ◽  
Black Scholes Model ◽  
Black Scholes ◽  
Integral Equation Approach ◽  
Increasing Function

Abstract In this paper, the fair price of an American-style resettable convertible bond (CB) under the Black–Scholes model with a particular reset clause is calculated. This is a challenging problem because an unknown optimal conversion price needs to be determined together with the bond price. There is also an additional complexity that the value of the conversion ratio will change when the underlying price touches the reset price. Because of the additional reset clause, the bond price is not always a monotonically increasing function with the underlying price, which is impossible for other types of the CBs. Of course, the problem can be dealt with using the Monte-Carlo simulation. But, a partial differential equation (PDE)/integral equation approach is far superior in terms of computational efficiency. Fortunately, after establishing the PDE system governing the bond price, we are able to present an integral equation representation by applying the incomplete Fourier transform on the PDE system.

scholarly journals Pricing Options and Convertible Bonds Based on an Actuarial Approach

2013 ◽  
Vol 2013 ◽  
pp. 1-9 ◽  
Author(s):  
Jian Liu ◽  
Lizhao Yan ◽  
Chaoqun Ma
Keyword(s):  
Convertible Bonds ◽  
Convertible Bond ◽  
Chinese Stock Market ◽  
European Options ◽  
Bond Price ◽  
Pricing Options ◽  
Actuarial Approach ◽  
S Model ◽  
Actuarial Model ◽  
Parity Relation

This paper discusses the pricing problem of European options and convertible bonds using an actuarial approach. We get the pricing formula of European options, extend the pricing results to the case with continuous dividend, and then derive the call-put parity relation. Furthermore, we get the general expression of convertible bond price. Finally, we conduct a comparative analysis of numerical simulation and make an empirical analysis between the B-S model and the actuarial model using the actual data in the Chinese stock market. The empirical results show that the efficiency of the actuarial model is superior to the B-S model.

scholarly journals Pricing Convertible Bonds with Credit Risk under Regime Switching and Numerical Solutions

2014 ◽  
Vol 2014 ◽  
pp. 1-13
Author(s):  
Wei-Guo Zhang ◽  
Ping-Kang Liao
Keyword(s):  
Credit Risk ◽  
Regime Switching ◽  
Numerical Solutions ◽  
Dilution Effect ◽  
Convertible Bonds ◽  
Bond Pricing ◽  
Convertible Bond ◽  
Pricing Model ◽  
Black Scholes ◽  
The Impact

This paper discusses the convertible bonds pricing problem with regime switching and credit risk in the convertible bond market. We derive a Black-Scholes-type partial differential equation of convertible bonds and propose a convertible bond pricing model with boundary conditions. We explore the impact of dilution effect and debt leverage on the value of the convertible bond and also give an adjustment method. Furthermore, we present two numerical solutions for the convertible bond pricing model and prove their consistency. Finally, the pricing results by comparing the finite difference method with the trinomial tree show that the strength of the effect of regime switching on the convertible bond depends on the generator matrix or the regime switching strength.

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